Corporate Finance
Overview
Our corporate finance offering provides clients with a suite of services that can assist them with their overall corporate structure and growth requirements. Our goal is to assist our clients in maximising the value of their business through the planning and implementation of resources, while balancing risk and profitability. Our approach to assisting our clients follows three disciplines:
Investments & Capital Budgeting
Investing and capital budgeting includes planning where to place the company’s long-term capital assets in order to generate the highest risk-adjusted returns. This mainly consists of deciding whether or not to pursue an investment opportunity, and is accomplished through extensive financial analysis. By using financial accounting tools, a company identifies capital expenditures, estimates cash flows from proposed capital projects, compares planned investments with projected income, and decides which projects to include in the capital budget. Financial modelling is used to estimate the economic impact of an investment opportunity and compare alternative projects. An analyst will often use the Internal Rate of Return (IRR) in conjunction with Net Present Value (NPV) to compare projects and pick the optimal one.
Capital Financing
This core activity includes decisions on how to optimally finance the capital investments through the business’ equity, debt, or a mix of both. Long-term funding for major capital expenditures or investments may be obtained from selling company stocks or issuing debt securities in the market through investment banks. Balancing the two sources of funding (equity and debt) should be closely managed because having too much debt may increase the risk of default in repayment, while depending too heavily on equity may dilute earnings and value for original investors. Ultimately, it’s the our responsibility to optimize the company’s capital structure by lowering its Weighted Average Cost of Capital (WACC) as much as possible.
Dividends and Return of Capital
This activity requires corporate managers to decide whether to retain a business’s excess earnings for future investments and operational requirements or to distribute the earnings to shareholders in the form of dividends or share buybacks. Retained earnings that are not distributed back to shareholders may be used to fund a business’ expansion. This can often be the best source of funds, as it does not incur additional debts nor dilute the value of equity by issuing more shares. At the end of the day, if corporate managers believe they can earn a rate of return on a capital investment that’s greater than the company’s cost of capital, they should pursue it. Otherwise, they should return excess capital to shareholders via dividends or share buybacks.
Our corporate finance team assist companies in:
- the definition of their strategic goals and the identification of the corporate finance deals that meet these goals;
- corporate finance deals: mergers and acquisitions, joint ventures and partnerships, divestitures and demergers;
- debt restructuring: analysing the company's performance and financials, preparing financial stability scenarios, negotiating with key creditors, etc.;
- corporate restructuring (LBO, MBO, demergers, tax/succession transactions) and shareholders’ agreements (negotiations with other shareholders, drafting of agreements and identification of potential new investors);
- company valuations on a stand-along basis and to determine share exchange ratios; relationships with institutions.
